Research

Whilst the Airports Commission is mandated with taking a “UK-wide perspective”, new analysis has questioned whether it has properly investigated the potential economic effect on the country’s regions of the shortlisted runway options.

A study by economic analysts Oxera, commissioned by Birmingham Airport, says the methodology used by PwC on behalf of the Airports Commission could hide winners and losers in UK regions, and underplays the negative effect that Heathrow expansion could have on some UK regions.

Oxera explains that this is because, rather than modelling what could happen to the Midlands and other UK regions under the Heathrow and Gatwick scenarios, PwC split the UK into three large blocks: London & the South East, the Rest of England, and the Rest of the UK.

The Oxera analysis says that: “A more relevant question for analysis which could have been asked by the Airports Commission and PwC is where the national losses and gains are accrued and how they are distributed.” Oxera conclude that that the most intuitive deduction about economic impacts, taking the Airports Commission’s traffic forecast as given, is that Heathrow expansion would be more likely to exacerbate rather than mitigate regional imbalances, by drawing more business into the London area.

These questions have been raised a week before The Airports Commission runway expansion consultation closes, and on the day that Birmingham Airport Chief Executive Paul Kehoe and Gatwick Airport Chief Executive Stewart Wingate are addressing businesses in the Midlands on the choice facing the country.

Paul Kehoe said: “Birmingham Airport had its busiest year ever in 2014 which shows that passengers and businesses want to fly direct. With our region attracting over a quarter of the UK's foreign direct investment, we are clear that the answer is a network of national long-haul airports, plugging all regions into global growth opportunities, not an even larger hub at Heathrow which would draw more business into an already overheated South East.”

“Oxera’s analysis raises concerns that the positive relationships between airports outside the South East and their regional business communities have not been properly valued by the Airports Commission.”

“Whilst Heathrow is essential and must remain a world class airport for the UK and our region, for the Midlands to grow, Heathrow must become complementary to Birmingham Airport. More capacity at Heathrow would limit our region's ambitions. We expect Dubai to overtake Dublin as our busiest route this year, which shows that business travellers are voting with their feet and don’t want to put all our eggs in one basket.”

Jerry Blackett, Chief Executive of the Greater Birmingham Chambers of Commerce said: “Our region has a larger trade surplus with North America than any other in the UK, and is the only region to have a positive balance of trade with China. This is down to the strength of our financial services, manufacturing and engineering sectors and more, all of which are supported by our long-haul connectivity to markets around the world. The right decision for our region is the one that allows more businesses to fly direct, not one that could draw more business to Heathrow and the South East.”

Stewart Wingate, London Gatwick CEO said: “Competition between the UK's airports is essential for delivering choice for passengers, businesses and investors across the country. By expanding Gatwick we can harness the strength of the country's network of great airports, delivering new South East capacity and supporting the growth of connectivity across the UK.”

The Midlands contributes more than £178 billion to the economy, including 16 percent of all UK exports, and Birmingham has recently been names as the UK’s most investible city. A letter from nine regional MPs, Birmingham City Council leader Sir Albert Bore and Midlands business leaders and published in December raised concerns that Heathrow growth could negatively impact the region, and asserted that: “The UK needs new competition and a network of airports to boost growth, drive down costs and improve value, not expansion of Heathrow.”

Birmingham Airport handled 9,707,449 passengers in 2014; an increase of 6.5% compared to 2013, including a 7.2% in long-haul. It commissioned the research as it is concerned that growth at Heathrow could negatively impact the space Birmingham has to grow its own long-haul and business flight offering, which it says is crucial for the economy of the Midlands.